Hospitality sector struggles though overall economy shows signs of recovery

The Indian hospitality industry, one of the worst impacted due to the global coronavirus pandemic, continues to be in a precarious situation even as the overall economy shows signs of recovery. One third of the estimated 50 million people who are engaged with the travel and tourism industry have either been furloughed or retrenched with the drying up of demand. Many others are working with significant pay cuts across segments. Overall prices too have come down by about 40 per cent.

While leisure travel has picked up considerably, corporate and business travel— comprising two-thirds of the total business—is unlikely to take off before the launch of an anti-Covid vaccine. Besides, demand for the meetings, incentives, conferences, and exhibitions (MICE) segment has also reduced. Barring weddings, forming a small fraction of the MICE segment, most others have been stalled. Inflow of international travelers into the country has also shrunk.

“If there is no second wave, we could then expect the tourism sector to become normal around 2024, that is when hotels will start going back to the profit zone,” Rahul Pandit, managing director, Hamstede Living, and member, CII National Committee on Tourism told IndiaNarrative.com.

He added that the leisure travel pattern too has changed drastically in the wake of the pandemic. “While people have picked up travelling for leisure pockets, business travel is still down and out, impacting pricing and recovery,” Pandit added.

Nikhil Sharma, regional director, Eurasia, Wyndham Hotels & Resorts EMEA, who echoed the same sentiment noted that the pandemic has created unprecedented circumstances for hospitality, affecting workers in many others sectors. “While these are extraordinary times, we are confident that the travel industry will inevitably rebound and demonstrate its strength and resilience,” he however said.

“In the face of continued industry uncertainty, we are beginning to see a slight uptick in consumer demand in India, specifically for domestic and leisure travel,” Sharma said, adding that given the uncertainty of the situation on a global level, it is difficult to say when real recovery would be seen.

The total lodging capacity in India is estimated at 1-1.3 million rooms.

According to business data platform Statista, the travel and tourism sector in India accounted for an estimated 12.38 per cent of the total employment opportunities generated in the country in 2018. The share of indirect employment was 6.38 per cent, the website said.

“The metros are the worst affected with business travel coming to a near halt. Along with this inbound the number of international tourists has remained abysmally low, affecting the overall hospitality industry,” Meena Bhatia, VP, marketing and operations, Le Meridien, said.

In 2017, the United Nations World Tourism Organization (UNWTO) data revealed that as many as 1.3 billion tourists spent about a whopping $1 trillion across the globe.

“Tourism is picking up at several destinations such as Goa, Jaipur and a few others near the major metros but the overall situation in the industry continues to be worrisome. Demand continues to be sluggish with restricted air and rail travel,” Subhash Goyal, chairman of Assocham’s tourism and hospitality council added.

<strong>Importance of the tourism sector</strong>

A study by Pahle India Foundation noted that several countries are dependent on tourism for its economic growth. While in Maldives, tourism directly accounts for 39.6 per cent of its total GDP, in Cambodia the figure is 14.1 per cent and in Vietnam it is 9.3 per cent, the study pointed out. In UK, tourism accounts for 3.7 per cent of its overall economy and 2.6 per cent in case of the US economy. The tourism industry has strong interlinkages with many other sectors including logistics, aviation, hospitality, handicraft among others.

<strong>Economic recovery</strong>

What has brought huge relief to India’s policymakers is the rise in manufacturing Purchasing Managers’ Index (PMI) at 58.9 in October. PMI in September was 56.8 while in August it was 52. As economic activities opened up, the country’s gross goods and services tax (GST) too touched Rs 1.05 lakh crore in October. The GST revenue collection in October was 10.1 per cent higher than Rs 95,480 crore collected in September.

 

 

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